Judge Sets Deadline In Facebook Fraud Lawsuit

July 25, 2007 July 26, 2007

BOSTON (Reuters) - A U.S. judge on Wednesday gave a group of former Harvard students two weeks to back up their claims that Facebook Inc.'s founder stole their ideas to create the fast-growing social networking Web site.

The three-year-old legal battle revolves around accusations, strongly denied by Facebook, that its founder Mark Zuckerberg stole ideas when he was hired by fellow Harvard students to write code for a site called Harvard Connection.

U.S. District Judge Douglas Woodlock said in court the former Harvard students may be using the lawsuit as a ploy to extract a settlement from Facebook, and pressed their lawyer to produce evidence of a commercial arrangement with Zuckerberg.

"Dorm room chitchat does not make a contract, so I want to see it," Woodlock told the courtroom in Boston.

He added that his impression was that "the purpose of this litigation is not to resolve a dispute but to provide leverage for the purposes of settlement."

The lawsuit alleges breach of contract and accuses Zuckerberg of stealing trade secrets, among other complaints.

The case is in the spotlight due to the celebrity of 23-year-old Zuckerberg and the surging popularity of Facebook, a red-hot Silicon Valley start-up company whose membership has spiked 33 percent to more than 32 million since May.

"We are pleased with the outcome of the hearing today," said Facebook spokeswoman Brandee Barker in a statement. "We continue to disagree with the allegations that Mark Zuckerberg stole any ideas or code to build Facebook."

Facebook is attracting intense speculation over whether it may be a takeover target by major Internet players or is still on course to seek an eventual initial public stock offering.

The lawsuit was first filed in September 2004 by ConnectU, a successor to Harvard Connection, against Facebook, Zuckerberg and his co-founders. Plaintiffs fired their first legal volley just six days after the Facebook site began in February 2004.

'Shocked and Floored'

Court papers filed by ConnectU state that Zuckerberg agreed to work for Harvard Connection founders Cameron and Tyler Winklevoss and Divya Narendra, then dragged his feet before launching Thefacebook.com in early 2004.

When asked at a news conference how it felt to have their ideas poached as the lawsuit asserts, Cameron Winklevoss said: "Initially, we were just shocked and floored .... There was definitely a feeling of betrayal, for sure."

"None of us were programmers so we hired programmers from among our friends," which included Zuckerberg in late 2003.

Tyler and Cameron Winklevoss are now international-class competitive rowers in a two-man team gearing up to compete in the World Championships in Munich. Tyler described the pair as "Olympic hopefuls" training for Beijing in 2008.

Thefacebook.com was set up as a social site for Harvard students but had already spread to other U.S. college campuses, attracting hundreds of thousands of members by the time the lawsuit was first filed nearly three years ago.

Since then, the student phenomenon spread across the United States and the world. A year ago, Facebook, which has relocated to Palo Alto, California, opened the site to members of all ages.

ConnectU's lawyer denied reports that it wanted Facebook to close. "There's been some inaccuracies in the press that ConnectU wants to shut Facebook down. ConnectU wants to correct that," attorney John Hornick told the judge.

He said there were no active talks on a settlement.

A separate California lawsuit filed in 2005 by Facebook alleges ConnectU hired programmers to hack into Facebook's site, stole thousands of e-mail addresses and then contacted Facebook members to win them over to ConnectU.